Lightning data provider Amboss introduces the Lightning Index Rate (LINER) index, aiming to draw more enterprises to Bitcoin‘s Lightning Network. The index offers businesses insight into the costs of setting up Lightning accounts on an annualized basis, as well as the yield they can earn by providing liquidity to the Lightning Network. This public information enables businesses to better compare these figures with counterparts in traditional financial institutions like Wall Street.
According to Amboss CEO and co-founder Jesse Shrader, LINER showcases Lightning’s cost advantages over legacy financial institutions, which he believes will help attract businesses to the network. The index presents two metrics: “yield” and “cost.” Yield can be earned when deploying capital to the Lightning Network, while the cost metric pertains to digital transactions.
Typically, lenders of money must trust that borrowers will pay them back, and the same applies to centralized finance. Users face the risk of trusting a third party with their funds, such as Celsius, which went bankrupt amid the crypto bear market, leaving the return of entrusted Bitcoins uncertain. However, using Lightning and Bitcoin without middlemen eliminates this credit risk associated with the traditional financial system.
Shrader emphasizes that this yield serves as a way to combat monetary inflation while providing low-risk yield and disrupting stagnant payment networks. Furthermore, businesses can analyze the cost of using Lightning, such as opening and closing channels, which require an on-chain Bitcoin fee that fluctuates over time.
“Now you can make a direct comparison to how much I am paying Visa [or another payment processor] to do my payment processing,” Shrader said. He added that while there might be modest savings through using Lightning in the US, the international payments fees are greatly reduced, resulting in cost savings for enterprises in payment processing.
The LINER index takes its inspiration from traditional banking systems like LIBOR, the benchmark interest rate at which global banks lend to one another. While most businesses in the Bitcoin world currently do not accept Lightning payments, the growth of easily accessible data such as LINER could potentially provide the necessary incentive for companies to make the switch. However, the question remains if Lightning, with its complexities, will become more appealing to businesses in the future.
Source: Decrypt
